BPCL, Bharti Tele to raise Rs 750 cr from debt market

Sujoy Manna

Mumbai, May 22: EQUITY is out, debt is in. Even as equity markets are struggling to woo retail investors, five entities are already out to raise over Rs 1,500 crore from the debt market over the next week, with three of them already in the market.

The target investors are high networth individuals, cash flush corporates and institutional investors, including mutual funds. Beginning next week, Bharat Petroleum Corporation Ltd (BPCL) and Bharti Tele will make their respective moves to raise around Rs 750 crore, with BPCL alone intending to mop up around Rs 500 cr (without the greenshoe option).

While BPCL intends to raise the required funds through non-convertible debentures, Bharti Tele intends to raise Rs 210 crore through simple bonds of three different tenures ranging from five to ten years.

The returns from these debt papers are attractive and range from a low of 10.75 offered by Bharti Tele to a high of 11.9 per cent offered by Andhra Pradesh Power Corporation.

There is expectations of interest rates softening further, following the cut in the CRR announced last fortnight. Add to this, the expectation of a further cut by the Indian bank rate after the Federal Reserve’s yet another move soon to cut the interest rates. In the light of these developments the coupon rates offered by the entities intending to raise debt funds are said to be attractive. Market analysts do not rule out the possibility of corporates too venturing out in the debt markets to raise cheap debt funds as the banking system is known to be flush with funds (following cut in CRR and bank rates).

Says an analyst with a leading brokerage firm, “After the PSUs are successful in raising debt funds, there is every possibility of private sector corporates entering the debt market. There is too much liquidity in the banking system and these funds will have to be deployed to worthy candidates”.

Meanwhile, three state-sponsored entities are already in the debt market. Last week, Andhra Pradesh Industrial Development Corporation (APIDC) floated its Rs 40-crore bond issue. The issue has a tenure of five years with offering 11.25 per cent coupon rate. These bonds offer both put/call option (at the end of third year) to its investors.

Andhra Pradesh Power Corporation too has floated Rs 350 crore bond issue. The issue has three tenures of seven, ten and twelve years with a put/call option at the end of five, seven and ten years respectively. The coupon rates for the bond are fixed at 12.36 per cent, 12.68 per cent and 12.89 per cent for the three different tenures respectively. The issue has been rated ASO by Crisil.

Sardar Sarovar Nigam, in the market currently, with a bond issue of Rs 200 crore, offers 12.5 per cent and 12.8 per cent respectively for five and ten years. The issuer however, has offered both put and or call option to investors after three and five years. The issue has a CARE AA-rating.